Retirement is a monumental life event, representing the culmination of decades of hard work and planning. While many imagine their retirement as a time for relaxation, travel, and pursuing long-forgotten hobbies, the reality for many retirees is far less glamorous. In fact, a significant number of retirees experience regret about how they prepared — or didn’t prepare — for this phase of life. According to surveys and research, the top retirement regret is simple yet profound: not saving enough money. This oversight leads to financial strain and a lower quality of life during retirement. The good news? This regret is avoidable with proper planning and action.

Why Not Saving Enough Tops the List of Regrets

For many people, retirement is often seen as something far off in the future. It's easy to push it to the back of your mind, especially when current financial demands like paying a mortgage, raising children, and dealing with unexpected expenses take precedence. This "I'll deal with it later" mentality is what contributes to the widespread issue of inadequate savings.

The most common reasons for not saving enough for retirement include:

1. Underestimating the cost of retirement: Many people don't realize just how expensive retirement can be. Healthcare costs, inflation, and unforeseen expenses can quickly eat away at retirement savings.

2. Relying too heavily on Social Security: While Social Security is a valuable resource, it was never designed to fully replace your income in retirement. Yet, many people assume it will be enough to cover their expenses.

3. Starting to save too late: The power of compound interest is best harnessed when you start saving early. Many people regret not taking full advantage of this financial tool by starting their retirement savings later in life.

4. Living beyond their means during working years: A lifestyle that prioritizes current pleasures over future security can lead to a lack of sufficient savings.

These factors combine to create a retirement landscape where many people face financial struggles, limiting their ability to enjoy the freedom they imagined during their working years.

How to Avoid the Top Retirement Regret

Avoiding the regret of not saving enough for retirement requires both proactive measures and a disciplined approach. Below are strategies that can help ensure you have enough money saved to enjoy a comfortable retirement.

1. Start Saving Early — The Power of Compounding

The earlier you start saving for retirement, the more time your money has to grow. Compound interest, the process where your investments earn interest on both the original amount and the interest previously accumulated, is a powerful wealth-building tool. For example, if you start saving $200 a month at age 25, assuming an average annual return of 7%, you could have around $500,000 by the time you’re 65. However, if you wait until age 35 to start, that amount could drop to around $250,000. The difference is significant and shows how time is your greatest ally when saving for retirement.

Even if you're starting later in life, it's important to begin saving as soon as possible. You may need to save a higher percentage of your income, but any contribution is better than none.

2. Maximize Contributions to Retirement Accounts

Take advantage of tax-advantaged retirement accounts such as a 401(k) or IRA (Individual Retirement Account). These accounts not only allow your money to grow tax-free (Roth IRA) or tax-deferred (Traditional IRA or 401(k)), but they often offer additional benefits like employer matching contributions.

• 401(k): If your employer offers a 401(k) plan, be sure to contribute at least enough to take full advantage of any matching contributions. This is essentially "free money" that can significantly boost your retirement savings.

• IRA: If you don’t have access to a 401(k), or if you want to save even more, consider contributing to an IRA. In 2024, the maximum contribution limit for IRAs is $7,000 if you're under 50, and $8,500 if you're 50 or older.

If you're self-employed or run a small business, there are also other retirement savings options available, such as a SEP IRA or Solo 401(k), which allow for higher contribution limits.

3. Automate Your Savings

One of the easiest ways to ensure you're consistently saving for retirement is to automate your contributions. Many employers offer the option to automatically deduct a percentage of your paycheck into your 401(k) or other retirement accounts. If you're self-employed, you can set up automatic transfers from your checking account into a retirement account each month.

Automating your savings ensures that you're prioritizing your retirement without having to think about it each month. It also prevents the temptation to spend that money elsewhere.

4. Review and Adjust Your Budget Regularly

Your retirement savings should evolve as your financial situation changes. Regularly review your budget to see where you can allocate more towards retirement savings. As your income increases over time, aim to increase your contributions rather than adjusting your lifestyle upwards. A good rule of thumb is to save at least 15% of your income for retirement, but if you're starting later, you may need to save more.

Additionally, avoid lifestyle inflation — the tendency to spend more as you earn more. While it’s tempting to upgrade your car or take more expensive vacations when you get a raise, it's essential to maintain a balance. Funnel any extra income into your retirement savings first and then decide what you can afford for discretionary spending.

5. Plan for Healthcare Expenses

One of the biggest unforeseen expenses in retirement is healthcare. Even with Medicare, many retirees face high out-of-pocket costs for premiums, deductibles, prescription drugs, and long-term care. According to Fidelity, the average retired couple aged 65 in 2024 may need approximately $315,000 saved to cover healthcare costs in retirement.

To prepare for this:

• Consider a Health Savings Account (HSA): If you're eligible for an HSA, this is an excellent tax-advantaged way to save for healthcare costs in retirement. Contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.

• Look into long-term care insurance: This can help cover the costs of nursing home care, assisted living, or in-home care, all of which can be substantial.

6. Diversify Your Investments

A common mistake people make is being either too aggressive or too conservative with their retirement investments. Your risk tolerance should depend on your age, financial goals, and proximity to retirement. When you're younger, you can afford to be more aggressive with your investments, as you have more time to recover from potential market downturns. As you approach retirement, it's generally wise to shift to a more conservative portfolio to protect your nest egg.

Diversifying your investments across stocks, bonds, and other asset classes can help you manage risk and ensure your portfolio is resilient through market fluctuations.

7. Factor in Inflation

Many retirees underestimate the impact of inflation on their savings. Over time, inflation erodes the purchasing power of your money. While inflation rates vary, it’s reasonable to expect that the cost of living will increase over the years.

To account for inflation, make sure your retirement savings strategy includes investments that have the potential to outpace inflation, such as stocks or real estate. Additionally, when estimating how much money you’ll need in retirement, use a higher-than-current inflation rate to avoid falling short of your goals.

8. Work with a Financial Advisor

Retirement planning can be complex, and the stakes are high. For many people, working with a financial advisor can be beneficial. A good advisor can help you:

• Set realistic retirement savings goals

• Optimize your investment strategy

• Plan for taxes and healthcare costs in retirement

• Adjust your plan as your circumstances change

Whether you're early in your career or nearing retirement, a financial advisor can provide valuable guidance to ensure you're on track.

9. Plan for Longevity

People are living longer than ever before, which means retirement savings need to stretch further. According to the Social Security Administration, a man turning 65 today can expect to live to about 84, and a woman can expect to live to about 87. But many people will live much longer than that, with about one out of every four 65-year-olds living past age 90.

Given this, it's important to plan for a retirement that could last 20 to 30 years or more. Underestimating how long you'll live is a key reason why some retirees run out of money. Make sure your retirement plan considers a long life to avoid outliving your savings.

The top retirement regret — not saving enough — is unfortunately common, but it’s avoidable with careful planning and action. Starting early, maximizing contributions, automating savings, and working with professionals are key steps that can help you avoid financial shortfalls in retirement. By taking a proactive approach, you can secure a future where you’re free to enjoy the retirement you’ve always imagined, without the stress of wondering whether you’ve saved enough. Retirement should be a time of relaxation and fulfillment, and with the right financial strategies in place, it can be exactly that. Give me a call, or schedule your appointment with me today.

Warm regards,

Sharon, Your Safe Money Lady™

Sharon Ben-David

Phone: (954) 261-5200
Licensed Mortgage Broker, Certified Professional Retirement Planning Adviser, and Financial Advocate

Protecting Your Nest Egg, Inc.

NMLS #2308601